Warren Buffett The Hypocrite

Taxes are very complex in that there are many different types of taxes designed to raise revenue and modify behavior that the government wants to incentivize or dis-incentivize. At the highest and most simplified level you have:

Sales Taxes – generally taxes paid by the buyer to the seller at the point of purchase (tax on food at the grocery store)
Income Taxes – taxes on money people earn paid to the Federal, State or Local governments. Often this money is “withheld” from your paycheck. Typically there are myriad deductions applied to determine the amount owed
Property Taxes – taxes levied on property owned based on valuation and paid to the local government annually
Excise or “Sin” Taxes – taxes on specific items that the government wants to dis-incentivize such as cigarettes and alcohol, collected at the point of purchase
Payroll Tax – tax on wages used to “fund” social security and medicare and are levied on the employer and employee alike, to a certain amount, with few or no deductions
Capital Gains Tax – tax on the profits of securities, properties or businesses sold when the amount received is greater than the cost
Estate Tax – tax on the accumulated assets of someone who died, paid to the government.

There has been talk in the media about wealthy individuals who advocate “higher taxes” for various reasons, and they receive disproportionate press coverage for their “selfless” actions. Warren Buffett in particular has called for higher taxes on the rich, specifically INCOME taxes, as you can note below:

As fiscal cliff talk buzzes around Washington and Wall Street, Buffett on Monday published a New York Times editorial calling on Congress to impose a 30% tax on people making $1 million to $10 million a year and 35% percent above that.

However, Warren Buffett is taking significant steps to actually avoid paying the ONE tax specifically designed for him – the estate tax. Here he joins with other billionaires on their “pledge” to give away their fortunes (to trusts that they would designate how the money gets spent).

Warren Buffett got 11 more billionaires to agree to give away half of their wealth to charity.

It is hypocritical for those billionaires like Buffett to set aside their money in charities to be directed for purposes that they “believe in” while everyone else’s money is funneled to Federal, State or Local governments to fund whatever that governmental body decides to do with it. You and I can’t control where our payroll, income, sales or property taxes go – and we have to accept that. Then Buffett, too, should accept that when he calls on higher taxes for everyone (but income taxes hardly dent him since his wealth would be taxed through capital gains if he chooses to sell or most likely the estate tax on all of his unrealized gains through his lifetime) he should dismantle his “estate tax” protections and just show up and give his billions directly into the US Treasury when he dies, to be used for whatever purpose the government chooses, likely to pay interest on debt that we issue to the Chinese or to pay for some sort of poorly run entitlement or wealth transfer scheme.

Warren – if you believe in the call for higher taxes, then just die without an estate plan, and let the Federal government get their 40% of your billions. It is the right thing for you to do, since you believe (apparently) that they will spend this money wisely.

Cross posted at LITGM

19 thoughts on “Warren Buffett The Hypocrite”

  1. You guys in Illinois better get ready too.

    I’m working on my wife, laying the groundwork for a move across the Indiana border. Any NW Indiana people here? What are some nice areas that still allow for a commute to downtown Chicago?

    Regarding Buffett, if the Republicans had any brains, they’d levy a tax on such massive gifts to the non-profit/foundation complex. However, the Republican party leadership continues to be oblivious to the class war against the lumpen proletariat and vulgar bourgeoisie.

  2. So many of these politicians think results from raising taxes is linear – never having had to run a business. You’d think – after the “luxury tax” on yachts and the resulting closure of so many boat yards that they would learn.

    @Percy – Gary Indiana is close but think the neighborhoods leave something to be desired ;-) Actually on this FB page I frequent there are a lot of Indianans – I could pose the question if you want

  3. All this is dependent on the absolute ignorance of the public on what it means to be uber-rich.

    Ask any of them what a “tax free foundation” is and who typically creates one… and how they are owned and operated. Most of the OWS types have no idea at all about these things, so they don’t grasp that Buffet doesn’t give a rodent’s patootie about “income taxes” since he really doesn’t HAVE an “income” as the rest of us think of the notion.

  4. (Bill, please do. And a big old “no” to Gary. I’ve also been to Hammond for some cage fights, and boy, was I underwhelmed. Way back when, I recall Munster being a decent middle class burg.)

  5. Must have been a Jean Shepherd fan.

    Any way, the second part of the estate tax dodge is the “non-profit” to which it is given. These institutions are the monasteries of our age. They are the means by which the dead inflict the living. If their liquidation requires a Henry VIII to rid us of them, I might almost sign up.

  6. IIRC Buffett has profited from the estate tax by buying private businesses at bargain prices after those businesses’ founders died and their heirs were forced to sell to cover tax bills.

  7. To equal justice, appertains also the equal imposition of taxes; the equality whereof depends not on the equality of riches, but on the equality of the debt, that every man owes to the commonwealth for his defense. … Which considered, the equality of imposition, consists rather in the equality of that which is consumed, than of the riches of the persons that consume the same. For what reason is there, that he which labors much, and sparing the fruits of his labor, consumes little, should be more charged, than he that living idly, gets little, and spends all he gets; seeing the one hath no more protection from the commonwealth, than the other? But when the impositions, are laid upon those things which men consume, every man pays equally for what he uses: nor is the commonwealth defrauded, by the luxurious waste of private men.

    By Thomas Hobbes of Malmesbury.
    Printed for Andrew Crooke, at the Green Dragon in St. Paul’s Churchyard, 1651.


    The Second Part of Common—Wealth

    Chapter XXX Of the Office of The Sovereign Representative

    Equal Taxes


  8. Buffet is no dummy. We can agree on that, correct?

    He has historically acted in informed, rational, and logical ways in order to increase his personal wealth. When the times called for investments in large international companies, he did so. When technology stocks were zooming up, he was hesitant, and thus escaped harm from the tech crash. He has always done his homework regarding possible investment paths, and has always followed a well-delineated overarching investment philosophy.

    Now, with B.O. as our President, we have stepped away from “rule of law” first principles, and are embracing a system in which we vote for our governmental leaders based on who has the highest movie-star-like qualities. Having picked our Prettiest President, we then step back, avert our eyes, and ignore the blatant and constant theft by these Pretties of our resources, wealth, and traditions.

    We watch them confiscate more and more of our own money with each passing month. Then we watch as they, openly and aggressively, hand that same money over to their friends with a “try stopping me!” hostile stare on their faces (directed at us). Then we write a letter to our local paper celebrating our new era of fairness and prosperity.

    (Yes, we’ve become The Stupid Tribe.)

    As I said above, Buffet is no dummy. When the best investment decision one can make is “be good friends with the biggest thief”, what has Buffet done?

    He’s become B.O.’s good and great friend.

    Let’s all watch as his personal fortune now rises to new heights.

  9. Being a former Hoosier, PU grad, and graduating HS in Indpls, I remember Schererville, IN as being a nice town just off US52. That was back when I65 was not yet complete. {Or maybe it was that I was hitching on 52, and just didn’t get over to I65.}
    Re taxes:
    Buffet and his secretary pay different rates, and the difference is obfuscated by the media to ignore the higher rate Buffet pays on normal income compared to the secretary, and his much lower rate on investment income.
    Apples and oranges, and it suits Obama, Pelosi, Reid and all the D’s and MSM just fine, thank you.


  10. I agree with the hypocrisy charge. But I see a lot of misunderstanding about Buffett’s rationale. I’ve been a Berkshire holder for a long time, have read many Buffett pieces, three biographies, etc. A key to his wealth has been his tax avoidance, primarily by 1)having Berkshire pay him a very low salary ($100,000 typically), 2) Berkshire paying no dividends letting the capital compound and 3) rarely selling his Berkshire shares. Buffett always intended to give away the vast majority of his wealth, and probably 98-99% of it has already been pledged to the Bill and Melinda Gates Foundation; Bill Gates and Buffett are very close friends. He does generate income through personal investing outside of Berkshire and I believe the latest income number was in the $25-30 million area, largely from capital gains.

    Buffett’s motivation has not been primarily to “get richer”, although he does take seriously his fiduciary duty to Berkshire shareholders. Unfortunately the motivation IMO is that he is a bias-blinded Gulfstream Liberal whose political philosophy seems to be 1) wealth redistribution trumps all and 2)the ends justifies the means. Most people don’t know that his father was actually a very conservative Republican congressman. For a variety of reasons Buffett drifted to the liberal side in the 60’s and a half-century of daily reading of the NY Times and the Washington Post (18% owned by Berkshire) has helped keep him there (he was close to the late Kate Graham, former Post owner).

    During the last debt ceiling DC kabuki dance Buffett and Bill Gates reportedly spent a couple of hours with Obama trying to convince him to reach out to Republicans and reach a “grand bargain” to solve the entitlement mess. If you wanted to take a “glass half-full” view of this action you can understand that people like Buffett and Gates are often trying to do the right thing. The contrary “glass half-empty” view (mine) is that the effort showed how little Buffett really knows or understands about Obama and his political views and goals. The idea that Obama wanted to cooperate with Republicans in that instance was absurd. Of course Buffett was always a Hillary backer and has already endorsed her for 2016. If we still have a country then. Paul Kengor recently wrote a piece at American Spectator naming Buffett “Dupe of the Year”. Both Buffett and Gates have genius level IQ’s, but sadly the political IQ’s don’t match (although Gates really hasn’t been remotely close to Buffett in terms of public political discourse).

  11. Percy Dovetonsils – For my NW Indiana list I have Munster, Highland, Schererville, Dyer and Chesterton if you want to go further east. I’m in Munster. NW Indiana is a very water rich area. Pay attention to the flood zones. They matter.

    Re: Buffett, the man doesn’t want to leave his kids what he feels would be ruinous amounts of wealth so he really does have to have an estate plan. He could though, will a certain amount to the US Government. That was how the Smithsonian was founded if I recall, a surprise bequest from a Mr. Smithson. Today, he could just dump the money into debt reduction if he cared to. The politicians would no doubt like the running room to rack up more debt.

  12. The public only knows Buffett from what they see and hear on the news. I had an argument with
    a liberal friend who argued that Buffett made all his money making furniture. He is that far removed from what is is, a big money guy.

    I have read that he does make a lot taking over companies where inheritence taxes are overwhelming.

    He says something like why should someone just get money without earning it, and uses the class envy thing while to get to another end.

    As they say, follow the money.

  13. “Follow the money” is a good place to start in analyzing these situations.

    Some rich guys seek publicity. Why? Several possibilities:

    -It helps them to make money.

    -They enjoy the attention.

    -The are preemptively or responsively defending themselves against regulatory/legislative attack.

    -They are promoting a cause.

    Buffet’s behavior seems to fit the first three categories.

    There are lots of rich guys nobody has heard of. They are the ones who don’t see benefit in publicity. The media tend to refer to them as “reclusive”. Most people would call them normal.

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